US court uses "protection of the US" defence

While US technology companies are trying to force their patent system on the rest of the world, it seems that when it comes to losing on their home turf they really don’t like it up ’em.

According to Courthouse News, German company Qimonda, which is in the middle of bankruptcy proceedings, attempted to revoke its patent licences with Samsung, IBM, Intel, Micron Technology and others.

Qimonda is desperate to sell its patent portfolio but cannot while they are being used. If this were a US company there would probably be much muttering, a few court actions and then money would change hands.

However, the US technology companies have managed to get a court order which claims that Qimonda cannot change its mind because it would “negatively impact the US economy”.

So, in other words, patent law can be suspended if the technology companies can prove that the US economy would be harmed if a patent holder enforced their rights.

Qimonda designs and manufactures semiconductor products and holds “one of the largest semiconductor IP portfolios in the world” with over 10,000 patents, of which at least 4,000 are US Patents.

This is where it gets interesting. In Germany, a debtor is permitted revoke a licensee’s right to use one of its patents, but this rule does not apply to the United States where a company can continue using the patent for the duration of the licensing agreement.

In 2009, the bankruptcy court applied German law to the matter of Qimonda’s US patents, but the licensees appealed saying, effectively, sod German law – this will harm glorious US companies.

The court said that the application of German law would nevertheless slow the pace of innovation, to the detriment of the US economy.

But US District Judge Thomas Ellis III granted Qimonda’s request for certification of an appeal. The technology companies were horrified and objected. However, the Judge said that the case raised a question of law that was a matter of public importance.

He said it was important that there needed to be a little more clarity over important issues of cross-border insolvency. This would be resolved from the resolution of any appeal.

The US Congress directly enacted legislation in 1988 denying a debtor the ability to revoke patent licences.

But this flies against Chapter 15 bankruptcy proceedings which say that the law should be governed in accordance with the bankruptcy laws of the nation in which the main case is pending. In this case it is Germany.